More so than most industries, construction has been reeling with the economic downturn in the last couple years. While it creates an excellent building atmosphere in terms of price, it also creates some unique challenges to your basement finishing project.

One potential issue that no one thinks about is the problem with contractors who can’t pay their bills. You might ask: “Why should this matter to me? I’ll pay my contractor 100% of what I owe when the job is finished.”

Listen carefully. Even though you paid the bill for your basement finishing project, you can still be subject to mechanic and material liens!

If your basement finishing contractor utilizes subcontractors (which is a good thing – for more info on this see our previous article titled “Basement Finishing – Will I Recoup My Costs?“) those subcontractors have rights to the work they’ve done on your house until they’ve been paid.

Further, if your basement contractor provides materials for the project (which is also a good thing – for more info on this see “Basement Finishing Member Benefits“), the suppliers have rights to those materials in your house until they’ve been paid.

Choose the Wrong Basement Finishing Contractor and You’ll Experience the Hell on Earth Known as Mechanics Liens

If your contractor is less than honest, or otherwise can’t pay the subcontractors and suppliers who helped on the project, then the basement project itself is the only recourse those subcontractors and suppliers have for the money they are owed!

An unpaid subcontractor or supplier can file a lien with the municipality to be placed against your home, pending final payment. This puts you in a sticky situation! You’ve already paid for the project, but the funds didn’t make it through to the rightful party.

Removing these liens isn’t easy and will likely involve attorneys, which is going to be expensive.

The best way to deal with a lien is to not get a lien in the first place. While there are a couple different ways to prevent this from happening, the easiest and most effective is to make sure you hire the right basement finishing professional.

You’ve probably thought to ask for past customer references, but have you ever considered requesting professional references? A while ago we made it common practice to offer a professional reference sheet to new customers.

With the number of failing businesses increasing, we felt it was important that our customers knew our accounts were current. If you know your basement finishing contractor pays his bills quickly and completely, it’s a good bet that you won’t be troubled with liens. You might also tell him upfront that you’ll require an unconditional waiver and release of lien rights at the end of the project. Alternately you can request proof of payment (check stubs or lien waivers from subcontractors and suppliers prior to giving your contractor final payment).

Unfortunately nothing is a sure thing any more, but starting with the right basement finishing contractor is an important step in the right direction.